Cisco surpasses Microsoft as world's most valuable company

NEW YORK -- Internet equipment maker Cisco Systems Inc. has pushed past Microsoft Corp. to become the world's most valuable company, further highlighting the Web's growing influence on the economy.

As of the close of trading Monday on the Nasdaq Stock Market, Cisco had a market value of $555.5 billion compared with $541.6 billion for Microsoft, based on the number of basic shares outstanding.Shares of Cisco inched up 683/4 cents to hit an all-time high of $80.061/4 while Microsoft tumbled $7.621/2, or nearly 7 percent, to $104.061/4 amid worries about the outcome of the government's landmark antitrust case against the software company.

The latest benchmark comes only one trading day after the San Jose, Calif.-based Cisco surpassed Microsoft in market value on a diluted-share basis.

Market value is calculated by multiplying the number of shares outstanding. By using diluted shares -- which include stock options, convertible bonds and other securities -- Cisco surpassed Microsoft in market value for the first time last Friday.

However, some of those options and securities may never be converted into stock, causing many analysts to use basic shares while calculating market value. Conversely, analysts focus on earnings per diluted share to gain a more realistic picture of the company.

Regardless of which method is used, the two companies may end up trading spots repeatedly on the valuation list, just as the Redmond, Wash.-based Microsoft did in when it first took the No. 1 ranking away from General Electric Co. in 1998.

The Fairfield, Conn.-based General Electric, relegated to third earlier this month, now has a market value of $520.5 billion, based on the number of basic shares outstanding.

Cisco has emerged as one of the most consistent growth companies in the technology industry because of soaring demand for its switches and routers, which are used to direct communications traffic for both corporate computer networks and the broader, public networks run by telecommunications companies and Internet service providers.

Cisco only has been around 14 years -- and a public company for 10 -- while Microsoft is marking its 25th anniversary this year. GE, however, dates back to 1892.